Housing starts could spell trouble for Alberta

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Housing starts have continued their plunge in Calgary and Edmonton, according to new figures from CMHC, adding to the industry’s uncertainty about the province’s real estate market amid low oil prices and a weak currency.

“Throughout 2015 we have really seen a slower pace of activity especially compared with 2014 but it’s important to keep in mind that last year was also a record year,” Richard Cho, CMHC’s principal of market analysis for Calgary, told the Calgary Herald.

“On top of that, we’ve seen more supply on the resale market and homes are also taking longer on the resale side (to sell). That’s also given buyers more choice and as a result I think we’re also seeing that impact new home construction.”

CMHC reported on Tuesday that total starts in Calgary were down 43.1 per cent in July from a year ago – the plunge was evident in the single-detached market and in the multi-family market.

In Edmonton, total housing starts were down as well, at 18,504 in July compared to June.

There has been an elevated concern in the industry that the mismatch between the growth in Canada's working-age population and the continued rise in national housing starts would create an inbalance in the housing market.

According to a recent column in the Globe and Mail by Ben Rabidoux, president of North Cove Advisors, Canada’s working-age population is growing at a meagre 0.4 per cent, which is the slowest pace on record and just one-third of the long-term average.

Compared to 2010, when Canada added more than 200,000 people to the working-age group, that number has been cut by more than 50 per cent over the last five years. Despite this, national housing starts have not slowed down significantly, creating concerns and drawing comparisons to 1989-1993 when Ontario house prices fell 25 per cent due to supply overwhelming demand.

Perhaps that trend is about to change, as the seasonally adjusted annual rate of urban starts across Canada decreased in Ontario, the Prairies, Atlantic Canada and Québec, while it increased in British Columbia.

Housing starts in Toronto trended lower, at 36,810 units in July compared to 39,108 in June, according to CMHC's figures.

“Toronto housing starts decreased for the first time in five months, due to contracting apartment starts," said Dana Senagama, CMHC's principal market analyst for the GTA.

"However, strong sales of pre-construction condominium apartments over the past two years will convert to more starts as the year progresses. Low-rise starts remained robust. A tighter resale market also resulted in demand spilling over into the new home market.”

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